Magyar Nemzeti Bank’s Key Interest Rate Lowered to 2.5%

April 29, 2014

Officials at Hungary’s central bank have cut their base rate at every monthly policy meeting since July 2013, but the incremental change has been reduced as slack in the economy has diminished. A second successive 10-basis point cut decided at today’s meeting leaves the rate level at 2.5%. There were previous easings of 15 basis points in January and February, 20 bps in each of the last five months of 2013, and 25 bps from August 2012 through July 2013. In today’s released statement, officials spoke of continuing economic growth, lessening economic slack, and moderate inflation in line with the target:

There remains a degree of unused capacity in the economy and inflationary pressures are likely to remain moderate over the medium term. The negative output gap is expected to close gradually at the policy horizon; therefore, the disinflationary impact of the real economy is likely to decrease looking forward and inflation is likely to move in line with the target in the medium term. The slight improvement in perceptions of the risks associated with the economy has provided room for a cautious reduction in interest rates.

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